DCT
6:21-cv-01102
CloudofChange LLC v. Lightspeed POS Inc
I. Executive Summary and Procedural Information
- Parties & Counsel:
- Plaintiff: CloudofChange, LLC (New York)
- Defendant: Lightspeed POS Inc. (now known as Lightspeed Commerce Inc.) (Canada)
- Plaintiff’s Counsel: Patterson + Sheridan LLP
- Case Identification: 6:21-cv-01102, W.D. Tex., 05/02/2022
- Venue Allegations: Venue is alleged to be proper because the Defendant is a foreign corporation and may be sued in any judicial district. The complaint further supports venue by alleging Defendant has customers, local support partners, and at least one employee within the Western District of Texas.
- Core Dispute: Plaintiff alleges that Defendant’s cloud-based point-of-sale (POS) systems infringe three patents related to web-based POS system building and configuration.
- Technical Context: The technology concerns web-based platforms that allow non-expert business owners to build, edit, and manage POS systems, a key innovation in the shift from manually-coded, on-premise systems to flexible, cloud-based solutions.
- Key Procedural History: The complaint notes that Plaintiff previously obtained a judgment of willful infringement against NCR Corporation on the same patents-in-suit. It also alleges sending pre-suit notice letters in 2017 and 2018 to ShopKeep, Upserve, and Vend, three companies that Defendant subsequently acquired, which may be relevant to the willfulness allegations.
Case Timeline
| Date | Event |
|---|---|
| 2008-02-05 | Earliest Priority Date for ’640, ’012, and ’793 Patents |
| 2016-07-26 | ’640 Patent Issued |
| 2017-10-06 | Notice Letter sent to ShopKeep Inc. |
| 2018-01-19 | Notice Letter sent to Vend Limited |
| 2018-05-03 | Notice Letter sent to Upserve, Inc. |
| 2018-09-25 | ’012 Patent Issued |
| 2020-11-25 | Defendant acquired ShopKeep Inc. |
| 2020-12-01 | Defendant acquired Upserve Inc. |
| 2021-04-16 | Defendant acquired Vend Limited |
| 2021-07-13 | Judgment entered in CloudofChange v. NCR |
| 2022-01-18 | ’793 Patent Issued |
| 2022-05-02 | First Amended Complaint Filed |
II. Technology and Patent(s)-in-Suit Analysis
U.S. Patent No. 9,400,640 - "Web-Based Point of Sale Builder," Issued July 26, 2016
The Invention Explained
- Problem Addressed: The patent describes the historical practice of assembling POS systems as involving manual coding of on-screen information by a business expert with help from a programmer, a process that was error-prone, time-consuming, and difficult to change (Compl. ¶21; ’640 Patent, col. 1:20-35). This difficulty led business owners to retain "older, inaccurate, out-of-date POS screens in order to avoid the POS screen editing process" (’640 Patent, col. 1:35-38).
- The Patented Solution: The invention is a web-based system that allows a non-expert user to build and edit POS terminals in real time using a remote workstation (e.g., a PC with a web browser). The system architecture consists of POS terminals that connect over the internet to a central web server, which runs "point of sale builder software" and stores system data in relational databases, allowing for remote configuration from anywhere in the world (’640 Patent, Abstract; col. 2:42-52; FIG. 3).
- Technical Importance: This approach moved POS configuration from a specialized, local, manual coding task to a flexible, web-based service accessible to business owners directly, enabling rapid, real-time updates across single or multiple store locations (’640 Patent, col. 3:38-46).
Key Claims at a Glance
- The complaint asserts at least Independent Claim 1 (Compl. ¶39).
- The essential elements of Claim 1 are:
- one or more point of sale terminals, that display POS screens,
- an internet connection from said one or more point of sale terminals to a web server,
- one or more local or remote PC workstations, and
- point of sale builder software that runs on said web server,
- wherein said local or remote workstations are utilized to build or edit said POS terminals in real time, from anywhere in the world and over the worldwide web,
- wherein said web servers are provided as a vendor subscription service wherein web server software resides and is hosted on said vendor's remote servers and wherein subscriber company's POS terminals access and repeatedly interact with said web server software from said vendor's remote servers, in order to perform the subscriber's desired terminal function, over a network, wherein the network comprises the Internet.
- The complaint does not explicitly reserve the right to assert other claims of the ’640 Patent.
U.S. Patent No. 10,083,012 - "Web-Based Point of Sale Builder," Issued September 25, 2018
The Invention Explained
- Problem Addressed: Like its parent, the ’012 Patent addresses the problem of prior art POS systems that required manual, expert-driven programming, which was inefficient and prone to error (’012 Patent, col. 1:31-49).
- The Patented Solution: The patent describes a system architecture centered on a web server with "POS builder software." This software generates POS terminals accessible on terminal devices. A separate "POS builder interface" allows a user to programmatically create or modify the POS terminals in real time over a network. The system is designed so that transaction data collected at the terminals is transmitted back to the web server and correlated with the corresponding transaction (’012 Patent, Abstract; col. 4:1-12).
- Technical Importance: This patent refines the inventive concept by focusing on a specific software architecture: a central builder that programmatically generates and modifies remote terminals and then correlates the resulting transaction data back at the server, creating a closed-loop system for configuration and data management (’012 Patent, col. 2:57-67).
Key Claims at a Glance
- The complaint asserts at least Independent Claim 1 (Compl. ¶83).
- The essential elements of Claim 1 are:
- a web server including POS builder software installed thereon;
- one or more POS terminals generated by said POS builder software and configured to be accessible at terminal devices, accept POS transactions, and collect corresponding transaction data;
- a POS builder interface configured to be accessible via network communication with the web server;
- wherein the POS builder interface is used to access the POS builder software to programmatically create or modify the POS terminals in real time;
- wherein the POS builder software interacts with the POS terminals to perform functions based on instructions from the builder interface;
- wherein POS transactions and data are transmitted from the terminals back to the web server; and
- wherein each POS transaction is correlated with its corresponding transaction data at the server.
- The complaint does not explicitly reserve the right to assert other claims of the ’012 Patent.
U.S. Patent No. 11,226,793 - "Web-Based Point of Sale Builder," Issued January 18, 2022
Technology Synopsis
Continuing the same inventive line, the ’793 Patent describes a system where a server communicates with POS terminals over a network. The server receives information from a builder interface to create or modify POS screens and also receives "further information" (e.g., transaction data) back from the terminals. The server then uses this combined information to configure the terminals. The claims explicitly recite that the information used for configuration can include employee clock data, customer updates, inventory information, and loyalty points, among others (’793 Patent, Abstract, col. 2:60-3:3).
Asserted Claims
The complaint asserts at least Independent Claim 1 (Compl. ¶133).
Accused Features
The complaint alleges that Lightspeed's POS systems, including Lightspeed Retail, Restaurant, ShopKeep, Upserve, and Vend, infringe by providing a server that communicates with POS terminals, allows for screen modification via a builder interface, and uses various types of transaction-related data (e.g., inventory, sales reports, loyalty data) to configure the terminals (Compl. ¶¶134-175).
III. The Accused Instrumentality
Product Identification
The accused products are Lightspeed Retail, Lightspeed Restaurant, ShopKeep by Lightspeed, Upserve by Lightspeed, and Vend by Lightspeed (Compl. ¶10).
Functionality and Market Context
The accused products are cloud-based POS systems offered as a subscription service to merchants (Compl. ¶¶71-75). They consist of a cloud-hosted "backend manager" accessible from devices with a web browser (desktops, laptops, tablets) and front-end POS applications that run on devices like iPads to conduct sales (Compl. ¶¶41, 59, 61). The complaint alleges that users access the backend manager to build and edit their POS menus, item layouts, and other store settings in real time, with the changes being reflected on the POS terminals (Compl. ¶¶65-69). The complaint notes that Defendant expanded its market presence by acquiring the companies that originally developed the ShopKeep, Upserve, and Vend products (Compl. ¶¶4-6). A screenshot shows the Lightspeed Retail backend manager, which allows users to add and manage inventory, accessible on a laptop (Compl. ¶41).
IV. Analysis of Infringement Allegations
’640 Patent Infringement Allegations
| Claim Element (from Independent Claim 1) | Alleged Infringing Functionality | Complaint Citation | Patent Citation |
|---|---|---|---|
| one or more point of sale terminals, that display POS screens | The accused systems include hardware (e.g., iPad-based terminals) and software applications that function as POS terminals and display sales screens to cashiers and customers. A provided image shows "Retail POS hardware designed for the cloud" (Compl. ¶47). | ¶¶46-51 | col. 2:25-27 |
| an internet connection from said one or more point of sale terminals to a web server | The accused products are "cloud-based" and require an active internet connection for POS terminals to access the backend manager on Lightspeed's servers and to sync data. | ¶¶52-57 | col. 2:27-28 |
| one or more local or remote PC workstations | The backend manager software is accessed from devices like desktop PCs, laptops, and tablets, which serve as remote workstations for configuring the system. A screenshot shows the Upserve POS interface on multiple devices, including a desktop and laptop (Compl. ¶62). | ¶¶58-63 | col. 2:28-30 |
| point of sale builder software that runs on said web server, wherein said local or remote workstations are utilized to build or edit said POS terminals in real time... | The backend manager, hosted on Lightspeed's servers, is alleged to be the "point of sale builder software" that allows users on their remote workstations to edit items, menus, and other POS functions in real time. | ¶¶64-69 | col. 2:30-35 |
| wherein said web servers are provided as a vendor subscription service... | Lightspeed offers the accused products under various subscription pricing tiers, as shown in a screenshot of its retail pricing webpage (Compl. ¶71). | ¶¶70-75 | col. 6:8-13 |
’012 Patent Infringement Allegations
| Claim Element (from Independent Claim 1) | Alleged Infringing Functionality | Complaint Citation | Patent Citation |
|---|---|---|---|
| a web server including POS builder software installed thereon | Lightspeed's cloud-based software, which enables POS configuration, is hosted on its servers, which are alleged to be the claimed "web server including POS builder software." | ¶¶90-95 | col. 6:14-16 |
| one or more POS terminals generated by said POS builder software... configured to accept POS transactions and collect corresponding transaction data | The POS interface displayed on devices like iPads is alleged to be "generated by" the builder software and is used to conduct sales transactions and collect data. A screenshot shows a Lightspeed Restaurant marketing page stating users can "Make menu edits in seconds" (Compl. ¶92). | ¶¶96-101 | col. 6:16-22 |
| a POS builder interface configured to be accessible via network communication with said web server... | The backend manager, which is accessed via a web browser over the internet, is alleged to be the claimed "POS builder interface." | ¶¶102-107 | col. 6:22-26 |
| wherein said POS builder interface is configured to be utilized to access said POS builder software for programmatically creating or modifying said one or more POS terminals in real time... | The backend manager allows users to add or edit items and menus, which programmatically modifies the functionality of the POS terminals in real time. A screenshot from Lightspeed Restaurant's marketing touts the ability to "Make menu edits in seconds" (Compl. ¶110). | ¶¶108-113 | col. 6:27-36 |
| wherein said POS transactions and corresponding transaction data... are configured to be transmitted to said web server... | As cloud-based systems, transaction data from the POS terminals is necessarily transmitted to and stored on Lightspeed's central servers for reporting and management. | ¶¶114-119 | col. 6:40-44 |
| wherein each POS transaction is correlated with corresponding transaction data occurring at said one or more POS terminals | The accused systems provide detailed sales history and reports where each transaction is linked with its corresponding data, such as items, customer, and employee. A screenshot of the "Sales History" view illustrates this correlation (Compl. ¶121). | ¶¶120-125 | col. 6:44-47 |
Identified Points of Contention
- Scope Questions: A central question for the ’640 Patent is whether the term "PC workstations," drafted with a 2008 priority date, can be construed to read on the modern ecosystem of devices like iPads and Android tablets that are used to access the accused systems. Similarly, does the phrase "POS terminals generated by said POS builder software" in the ’012 Patent cover a system where a pre-compiled client application is downloaded from an app store and then configured by a remote server?
- Technical Questions: What is the specific mechanism and timing by which the accused systems "build or edit said POS terminals in real time" as required by the ’640 Patent? The infringement analysis may turn on whether the accused update process (e.g., periodic sync vs. real-time push) meets the claimed "real time" limitation. For the ’012 Patent, a key technical question is what evidence demonstrates that the client-side app is "generated by" the server-side software, as opposed to being a distinct client application that merely communicates with it.
V. Key Claim Terms for Construction
Term from ’640 Patent: "local or remote PC workstations"
- Context and Importance: This term's scope is critical, as the accused systems are managed via a wide array of modern devices, not just traditional Personal Computers. The definition will determine whether infringement can be found based on access from tablets and smartphones. Practitioners may focus on this term because its meaning is anchored to the technology landscape of its 2008 priority date.
- Intrinsic Evidence for a Broader Interpretation: The specification describes the functionality of the workstation as the device used to access the builder, without limiting its hardware. It states that the software can be viewed from "any PC 33 who has Internet access 37 and a password," suggesting the primary requirements are connectivity and a browser, not a specific form factor (’640 Patent, col. 4:36-39).
- Evidence for a Narrower Interpretation: The explicit use of the term "PC workstation" could be argued to limit the scope to the desktop and laptop computers commonly understood by that name in 2008, potentially excluding the tablets and smartphones that became ubiquitous later. The patent figures do not depict the workstation, providing no further visual context.
Term from ’012 Patent: "POS terminals generated by said POS builder software"
- Context and Importance: This term is at the heart of the infringement theory for the ’012 Patent. Its construction will determine whether a system architecture using pre-compiled client apps that retrieve configuration data can be said to have terminals "generated by" a server.
- Intrinsic Evidence for a Broader Interpretation: The patent could be interpreted functionally. The specification describes a process where the operator uses the builder to "specify and display the number, shape and arrangement of selection keys or buttons on said POS screens" (’012 Patent, col. 3:12-15). This could support a view that if the server-side software defines the functional layout and logic that the client app renders, the "terminal" interface is effectively "generated by" the builder.
- Evidence for a Narrower Interpretation: The plain meaning of "generated by" could be argued to require the server to create and send the executable code or a complete UI definition file for the terminal. An argument for non-infringement could be made if the accused system uses a thick-client app that simply requests data (e.g., item lists, prices) and renders them using its own pre-built UI components. The abstract's statement that the builder "builds, edits, and tests new POS terminals" could support this more direct, creative interpretation (’012 Patent, Abstract).
VI. Other Allegations
Indirect Infringement
The complaint alleges induced infringement, stating that Lightspeed provides instructions, user manuals, and marketing materials that direct its customers to use the accused products in an infringing manner (Compl. ¶¶37, 81, 131). It further alleges that since the accused products have no substantial non-infringing uses, their sale constitutes contributory infringement (Compl. ¶¶38, 82, 132).
Willful Infringement
Willfulness is alleged based on both pre-suit and post-suit knowledge. The complaint asserts pre-suit knowledge based on notice letters sent to ShopKeep, Upserve, and Vend before their acquisition by Lightspeed, and on a prior willful infringement judgment against NCR on the same patents, which allegedly put the industry on notice (Compl. ¶¶29, 30). The complaint alleges infringement has been willful at least since the acquisition of ShopKeep (Compl. ¶29).
VII. Analyst’s Conclusion: Key Questions for the Case
- A central issue will be one of architectural equivalence: Do Lightspeed's modern cloud-and-app systems, which pair a pre-compiled client application with a backend server, embody the specific architecture claimed in the patents, where a server "builds" or "generates" the POS terminal itself? The resolution will depend on whether the court views this generation functionally or as a literal creation of code.
- A key legal question will be one of claim scope and evolution: Can terms rooted in a 2008 technological context, such as "PC workstation," be construed to cover the modern ecosystem of tablets and mobile devices that are central to the operation of the accused systems? This will be a critical battleground in claim construction.
- An important evidentiary question will concern willfulness: Given the prior successful litigation against a major competitor and the alleged pre-acquisition notice to entities now owned by the Defendant, the case raises a significant question of whether Lightspeed acted with the requisite knowledge and intent to support a finding of willful infringement, which would have substantial implications for potential damages.